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Korea passes law allowing gov't to shut down failing universities

Published: 23 Jul. 2025, 20:32 Updated: 24 Jul. 2025, 16:11

An old computer sits in a classroom at a financially struggling private university. [JOONGANG ILBO]

The Korean government now has the legal authority to force the closure or dissolution of financially troubled private universities following the long-awaited passage of a law aimed at overhauling the higher education sector amid a steep decline in nation's school-age population.

The legislation comes as the country grapples with an oversupply of under-enrolled or abandoned schools, especially in rural areas, due to a sharp nationwide decline in birthrates combined with deepening regional inequalities that concentrate the shrinking student population in the greater Seoul area.

The Ministry of Education announced Wednesday that the National Assembly passed an act that supports the structural reform of private universities, nearly 15 years after the legislation was first introduced in 2010. The bill had faced years of opposition, particularly from progressive lawmakers concerned that it would enable corrupt school foundations to exit with undue financial gain.

That opposition softened in the current 22nd National Assembly, who assumed office in 2024, after a key revision reduced the so-called “dissolution incentive payment” to a liquidation settlement, which grants university founders up to 15 percent of leftover assets after the school corporation is dissolved. The change helped accelerate bipartisan negotiations on the bill.

The new law enables the Ministry of Education to conduct financial assessments of private universities and, based on the results, order them to halt student recruitment, shut down or formally dissolve. Under the Park Geun-hye administration, the ministry attempted similar reforms through its broader restructuring plan but lacked the legal means to enforce closures, limiting its effectiveness.

The legislation also mandates compensation for faculty and students affected by such closures. However, it does not include provisions for the reemployment or job placement of faculty, a measure some had pushed for.

The government and education industry expects the law to help wind down financially unstable universities while minimizing harm to faculty, students and other members of the academic community, and to gradually reduce enrollment capacity as a result.

“The structural reform process based on financial diagnostics will be implemented with real teeth, along with government support mindful of local communities,” a ministry official said.

Participants receive one-on-one consultations at the college information center during the 2025 Busan University Admissions Counseling Camp at the Bexco convention center in Haeundae District, Busan, on July 18. [YONHAP]

According to the Korea Advancing Schools Foundation, 14 of the 280 private universities evaluated last year were deemed financially distressed.

Among general universities, the list includes Gyeongju University, Far East University, Daegu Arts University, Daejeon Theological University, Jeju International University and Hanil University and Presbyterian Theological Seminary.

In the junior college category, the eight designated schools were Naju College, Gwangyang Health Sciences University, Kookje University, Kimpo University, Donggang University, Busan Arts College, Yeoju Institute of Technology and Woongji Accounting & Tax College.

Despite the new law, education experts say further legislative refinement is needed in upcoming enforcement ordinances. Hwang In-seong, secretary general of the Korean Association of Private University Presidents, said the law should include “clear mechanisms for utilizing university assets during restructuring to fully realize its intent.”

Yoo Won-joon, director of the Korean Association of Private University Professors, added, “The law does not set a time frame for restructuring, which risks the creation of so-called ‘zombie universities.’ These institutions should be resolved within three years.” He called for rigorous oversight to ensure that restructuring plans are faithfully executed.

Lawmakers vote during the second plenary session of the 427th National Assembly extraordinary session in Yeouido, western Seoul, on July 23, passing a revision to the Higher Education Act that lowers the cap on university tuition hikes from 1.5 times to 1.2 times the average consumer price increase over the past three years. [NEWS1]

Tuition hike cap to be lowered in 2026

In addition to the structural reform law, lawmakers passed five other education-related bills during Wednesday’s plenary session. These include revisions to the Act on the Early Childhood Education Support Special Account, the Higher Education Act, the Education Officials Act, the Private School Act and the Educational Environment Protection Act.

The revision to the Higher Education Act lowers the maximum rate at which universities may raise tuition. Starting in the spring semester of 2026, tuition increases will be capped at 1.2 times the average inflation rate over the previous three years, down from the current limit of 1.5 times. The amended law takes effect in October. The Ministry of Education had set this year’s tuition hike ceiling at 5.49 percent.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY LEE BO-RAM [[email protected]]